Today, 1 October 2025, Budget for 2025 was unveiled by Minister for Finance Jack Chambers and Minister for Public Expenditure Paschal Donohoe. This year’s budget introduces a range of measures aimed at securing Ireland’s economic future, focusing on improving public services, enhancing supports for households, and promoting sustainable growth.
At FLC Frank Lynch and Co, we are committed to keeping you informed about how these changes might impact you or your business.
If you would like to discuss any of the points mentioned below or seek advice on how these changes could affect your financial planning, please feel free to contact our office.
Key Announcements
Income Tax
The 2025 Budget introduces a series of important changes to income tax, including a further reduction in the Universal Social Charge (USC) and increases to key tax credits, aiming to ease the financial burden on individuals and families.
- Universal Social Charge (USC) Reduction: The USC rate will be reduced for the second consecutive year, dropping from 4% to 3% on incomes between €25,000 and €70,000.
- National Minimum Wage Increase: From 1 January 2025, the national minimum wage will rise by 80 cent, bringing it to €13.50 per hour.
- Increased USC Entry Threshold: The entry point for the 3% USC rate will increase by €1,622, raising the threshold to €27,382.
- Higher Tax Credits: The Personal, Employee, and Earned Income Credits will each increase by €125
- Standard Rate Cut-Off Point Adjustment: The Standard Rate Cut-Off Point will increase by €2,000, rising to €44,000 for individuals
Inheritance Tax – Capital Acquisitions Tax (CAT)
As part of Budget 2025, the thresholds for Capital Acquisitions Tax (CAT) have been increased, offering greater relief for those receiving gifts or inheritances. These changes aim to ease the tax burden on families and individuals during the transfer of assets.
- Group A Threshold: The tax-free threshold for gifts or inheritances from parents to children will rise from €335,000 to €400,000.
- Group B Threshold: For gifts or inheritances from siblings, nieces, nephews, and grandparents, the threshold will increase from €32,500 to €40,000.
- Group C Threshold: For gifts or inheritances from more distant relatives, such as uncles, aunts, and cousins, the threshold will rise from €16,250 to €20,000.
Housing and Renters
In Budget 2025, Minister Jack Chambers introduced a range of housing measures.
- Rent Tax Credit Increase: The rent tax credit for tenants will increase from €750 to €1,000 per individual, and to €2,000 for jointly assessed couples, offering much-needed relief to renters dealing with cost-of-living pressures.
- Additional Funding for the Land Development Agency (LDA): An extra €1.25 billion has been allocated to the Land Development Agency, bringing its total funding to €6.25 billion. This investment will help boost the supply of affordable housing.
- Help to Buy Scheme Extension: The Help to Buy scheme, which supports first-time buyers in purchasing new homes, has been extended until the end of 2029.
- Increased Stamp Duty on High-Value Properties: Properties valued over €1.5 million will now be subject to a 6% stamp duty rate. The existing 1% rate will continue to apply to values up to €1 million, and the 2% rate will apply to properties valued between €1 million and €1.5 million.
- Relief for Pre-Letting Expenses: The relief for pre-letting expenses incurred by landlords, aimed at bringing vacant properties into the rental system, has been extended for three years, until the end of 2027.
- Vacant Homes Tax Increase: To encourage the use of vacant properties, the vacant homes tax will be increased from five to seven times the property’s existing base Local Property Tax rate
Children
Budget 2025 introduces several family-focused measures
- Double Child Benefit Payments: Families will receive double payments of child benefit in both November and December, providing extra financial assistance during the holiday season.
- Lump Sum Payments: A €400 lump sum payment will be provided to families receiving the Working Family Payment, and an additional €100 lump sum per child will be paid to recipients of Qualified Child Increase payments.
- National Childcare Scheme Funding Increase: Funding for the National Childcare Scheme will rise by 44%, resulting in a €1,100 reduction in full-time childcare costs, helping to make childcare more affordable for working families.
- ‘Baby Boost’ Payment: From 1 January 2025, parents of newborns will receive a one-off ‘baby boost’ payment of €420 per child to help with the costs of welcoming a new baby.
- Free Public Transport Extension: Free public transport will be extended to include children aged five to eight
Auto-Enrolment Retirement Savings Scheme
A key feature of Budget 2025 is the introduction of the Auto-Enrolment Retirement Savings Scheme, which will begin in September 2025. This new retirement savings system is designed to help nearly 800,000 workers prepare for their retirement by automatically enrolling them into a pension plan.
Who Will Be Enrolled: Employees who do not have an existing pension scheme, earn more than €20,000 annually, and are aged between 23 and 60 will be automatically enrolled. This ensures that a broad segment of the workforce will have additional savings when they retire, reducing their reliance on the state pension alone.
Contributions from Employers and the State: A advantage of the scheme is the shared contribution structure. For every €3 an employee contributes, the employer will match it with an additional €3, and the State will top up the account with €1. This means for every €3 the employee contributes, a total of €7 will be added to their retirement savings.
Mortgage Interest Relief
The Mortgage Interest Tax Relief, initially introduced on a temporary basis in Budget 2024, has been extended for an additional year under Budget 2025. This relief is aimed at helping homeowners manage rising mortgage costs.
- Extended for One More Year: Homeowners will now be eligible for mortgage interest relief on the increased interest paid
- Relief Amount: The relief will be available at the standard income tax rate of 20%, with a maximum cap of €1,250 per property.
Small Benefit Exemption
As part of Budget 2025, the Small Benefit Exemption has been enhanced, offering employers more flexibility in providing tax-free, non-cash rewards to their employees.
- Increased Annual Limit: The annual limit for the exemption will rise from €1,000 to €1,500, allowing employers to provide greater benefits without incurring tax, PRSI, or USC.
- Increased Number of Benefits: Employers will now be permitted to offer up to five non-cash benefits to employees in a single year under this exemption, giving businesses more opportunities to reward their staff.
Reduced VAT Rate of 9% for Gas and Electricity
To further support households and businesses amidst ongoing cost-of-living challenges, the government has announced an extension of the reduced VAT rate of 9% on gas and electricity.
- Extension of Reduced Rate: The 9% VAT rate will be maintained for an additional six months, now set to continue until April 30, 2025.
VAT Registration Threshold Increase
As part of the government’s ongoing support for small businesses, Budget 2025 includes an increase in the VAT registration thresholds for the supply of goods and services.
- New VAT Registration Thresholds:
- The threshold for the supply of goods will rise from €80,000 to €85,000.
- The threshold for the supply of services will increase from €40,000 to €42,500.
Business Tax
Budget 2025 introduces several business tax measures aimed at enhancing Ireland’s competitiveness and supporting small businesses, start-ups, and R&D activities.
- Participation Exemption for Foreign Dividends: From January 1st, 2025, a new participation exemption will be introduced for foreign-sourced dividends from EU/EEA countries and tax treaty jurisdictions. This is part of the government’s effort to align with international tax standards, with ongoing work to develop a potential foreign branch exemption in the future.
- Increase in R&D Tax Relief: The threshold for the first-year payment under the Research and Development (R&D) tax credit regime will be increased from €50,000 to €75,000, offering additional support to companies investing in innovation.
- Enhanced Start-up Relief for Small Companies: Start-up relief, which reduces corporation tax for new small businesses, has been expanded to ensure it also covers small owner-managed companies, providing greater tax relief for entrepreneurs.
- Corporation Tax Deduction for Listing Expenses: A new corporation tax deduction of up to €1 million will be available for expenses related to a company’s first listing on an Irish or EEA stock exchange.
- Stamp Duty Exemption for SMEs: Work is underway to introduce a stamp duty exemption for SMEs accessing equity through financial trading platforms, subject to State Aid approval
Capital Gains Tax (CGT)
Budget 2025 introduces several key enhancements to Capital Gains Tax (CGT) reliefs, particularly aimed at supporting investment in innovative start-ups and encouraging business continuity within families.
- Enhanced CGT Relief for Angel Investors: The lifetime limit on gains eligible for CGT relief for angel investors in certain innovative start-ups will be significantly increased, from €3 million to €10 million, encouraging greater investment in early-stage businesses.
- Retirement Relief Changes: The extension of the upper age limit for Retirement Relief to 70 will be retained. Additionally, a new provision introduces a clawback mechanism if the child or children who receive the assets dispose of them for more than €10 million within 12 years. If the assets are retained for more than 12 years, CGT will be fully abated, incentivizing long-term asset retention.
- EII, Start-Up Relief for Entrepreneurs, and Start-Up Capital Incentive Extensions: These schemes, which support entrepreneurship and start-up growth, will be extended for two years, until the end of 2026.
- The EII scheme will be enhanced by doubling the maximum investment amount eligible for relief from €500,000 to €1 million.
- The Start-Up Relief for Entrepreneurs will also see its relief limit increase from €700,000 to €980,000.
The 2025 Budget announcements are set yo have an impact on your financial situation. We encourage you to consult with us at FLC Frank Lynch & Co for personalised advice on how these changes may affect you.
Our dedicated team would be delighted to discuss any queries you may have. You can reach us by phone on 0429332273 or email info@flc.ie
As this release is intended as a general guide to the subject matter, it should not be used as a basis for decisions. For this purpose advice should be obtained which takes into account all clients circumstances. Every effort have been made to ensure the accuracy of the information in this release. In view of its purpose, the reader will appreciate that we are unable to accept liability for any errors or omissions which may arise.
